Tuesday, April 26, 2016

It’s bad enough
when analysts thank CEOs for letting them ask a question on an company earnings
call, at least when they do it in a way that goes beyond a simple act of politeness and more towards a cringe-making act of fawning, which too many analysts have a way of doing these days.

This is, after
all, a business: it’s an analyst’s job
to ask questions; it’s a CEO’s job to answer them.Get on with it.

What’s worse,
however—much worse—is when an analyst who asks a good question gets schmoozed by
the CEO, and instead of following up and getting an answer, surrenders.

It happened
tonight on the Apple call.

After thanking the
company for “fitting me in” (really?) the analyst asked Tim Cook—all quotes are from the
indispensable Seeking Alpha—a very reasonable question about the “top two
or three things” that had changed from the previous quarter, when Apple’s CEO
was way more bullish about the demand environment for iPhones than it turned
out to be.

Cook’s response
turned the question into a math equation:

“…we
did not contemplate or comprehend that we were going to make a $2 billion-plus
reduction in channel inventory during this quarter. And so if you factor that
in and look at true customer demand, which is the way that we look at it
internally, I think you'll find a much more reasonable comparison.”

The analyst jumped
on Cook for changing the subject—after all, he said, the fact that you decided
to cut $2 billion out of channel inventory must mean you had $2 billion more
product in the channel than you expected, which means “true customer demand,”
as Cook called it, was $2 billion weaker than plan, right?

Ha!We’re joking.

The analyst did no
such thing.He surrendered.“Okay, great.Thank you,” he said, and then asked a
softball follow-up.

Tim Cook took home
$10.3 million last year.He can handle
tough questions.

Personally, I’d
like to know why Cook—who gets on his high moral horse every time some
politically correct brushfire starts up somewhere in America—gives up without a
sound when the Chinese authorities demand the Apple Store stop carrying apps
involving the Dalai Lama.

The content contained in this blog represents only the
opinions of Mr. Matthews.Mr. Matthews
also acts as an advisor and clients advised by Mr. Matthews may hold either
long or short positions in securities of various companies discussed in the
blog based upon Mr. Matthews’ recommendations.This commentary in no way constitutes investment advice, and should
never be relied on in making an investment decision, ever.Also, this blog is not a solicitation of business
by Mr. Matthews: all inquiries will be ignored.The content herein is intended solely for the entertainment of the
reader, and the author.

We here at
NotMakingThisUp only write book reviews when we like the book.(If we don’t like it, we don’t write
anything at all, because it’s hard—really hard—to write a book, so just the
fact that someone has written a book ought to be respected, not criticized.)Journalist Dan Lyons has not only written a
book, but it’s good—and not just “good,” but laugh-out-loud good.

The subject
matter, however, is not always laugh-out-loud funny.

It’s about Lyons’ time at HubSpot, the “cloud-based marketing and sales software platform company”
he worked for at roughly the peak of the Web 2.0 cycle (Lyons would probably
describe it as a “spam-based marketing and sales software platform company,”
but we’ll go with the official terminology), and while you may be more familiar
with the frat-boy excerpts that have already made made plenty of headlines,
they’re nothing anybody who was around during the last bubble hasn’t heard
about before and don’t need repeating here.

Way more
interesting is Lyons’ take on what it’s like to be a 50+ year old Boomer working
at a hotshot Millennial company—or “cult,” as he sees it.

Lyons listens to
conference calls with the company’s ‘social media scientist,’ “a competitive
weightlifter who lives in Las Vegas and basically does nothing”; he spends too
much time in meetings, which, “like most journalists—and, I would argue, most
sane people” he detests; and he gets so fed up with the bubbly self-reinforcing
“Happy!!Awesome!! Start-Up Cult”
culture that he begins sending around emails like “Jan is the best!!!Her can-do attitude and big smile cheer me up
every morning!!!!!!!” about the “grumpy woman who runs the blog,” until he is
told to “cut that s--- out.”

It’s a riot, and
it makes the book swing, but that’s not the important stuff.

The important
stuff includes the sheer whiteness of the workforce, which should be no
surprise to him but is (did he really report on the technology world most of
his career and not notice that before?); not to mention the youngness of the
place, which should also be no surprise to him (does he not know how young Mark
Zuckerberg still is?)

But the spookiest
bit has nothing to do with the age thing, or the “astonishing lack of
diversity” (did he think poverty-trapped kids from Harlem are actively
recruited by young affluent suburban white kids?), it’s the cultish behavior
reinforced from the top, most notably in the way in which employees who’ve been
fired are NOT said to have been “fired” or to have “resigned to pursue other
interests.”

They are said to
have “graduated.”

“Nobody ever talks about the people who
graduate,” writes Lyons, “and nobody ever mentions how weird it is to call it ‘graduation.’”Yet “graduations” happen quite a lot,
apparently: the best line in the book being “People just go up in smoke, like
Spinal Tap drummers.”

Of course, Lyons himself
eventually “graduates” after the culture clash starts to get to him (which it actually
did on his first day at HubSpot, but he persevered) and he begins to set himself up in ways that make
you scratch your head and wonder if he ever actually worked in a corporate
environment.

Exhibit A in the
did-he-really-not-see-this-coming-a-mile-away setup to his own graduation is
when Lyons pitches a new online magazine—an
idea his direct boss had already rejected—to his boss’s bosses without his
boss knowing Lyons was going over his head.

“They love the
idea,” he says of the meeting with HubSpot’s co-founders.“That night I go home feeling like a
conquering hero.”

Poor bastard, you
think, reading that line.

Exhibit B in the
did-he-really-not-see-this-coming-a-mile-away department is when Lyons is shocked—shocked!—that
nothing subsequently happens, because he didn’t have anyone else at the meeting
to verify that the two co-founders actually approved the idea.

As one colleague
far wiser than Lyons in the ways of corporate politics tells him, “You should
have had a witness.”

Exhibit C in the did-he-really-not-see-this-coming-a-mile-away department, naturally, is when Lyons’
boss-who-rejected-the-idea-before-Lyons-chose-to-go-over-his-head appropriates the
idea as his own.

By now, however,
even Lyons has figured out what’s happening: “At this point the message could
not be more clear,” he writes.His boss
“is doing everything short of hiring a skywriter to scrawl GET OUT, DAN in the
airspace above HubSpot headquarters.”

Lyons at least
has some fun as the clock winds down.At an anything-goes marketing idea meeting he proposes putting an “unbearably
ambitious and energetic young woman who recently graduated from college, loves
HubSpot more than life itself, and would do just about anything to get a
promotion” in an orange (the Hubspot color) jumpsuit and helmet and firing her “right
through an open window and into a cubicle.Bang!There she is!She doesn’t miss a beat.She just starts giving a lecture about
marketing.”

To a cynical career
journalist, HubSpot was a gift that kept on giving.

On the downside,
however, Lyons stretches at times to make bigger points—something book editors
tend to encourage authors to do in order to gin up the meaning of an otherwise highly
enjoyable, and very telling fish-out-of-water memoir.

For example, trying
to turn his time at HubSpot into a lesson about the cheerful heartlessness of
the Web 2.0 revolution, he actually quotes Carl Icahn—the slimeball takeover
artist who bankrupted TWA while pocketing a sweet discount airline ticket deal
for himself, among many other things that make Donald Trump look magnanimous and would normally set a cynical journalist's hair on fire—about
Marc Andreessen from back when they were fighting over eBay, which is stupid
because Andreessen (think Netscape, Facebook, Twitter, among other
life-changing companies he’s been involved in) has added more value to the
current quality of life in America than even Carl Icahn has managed to extract
for himself.

Lyons also quotes,
of all things, a snarky Robert Reich “Facebook post” about the sharing economy
having become a “share the scraps” economy—tell that to the next Uber driver you
get who’s paying his way through college or saving for a condo or running a
non-profit and wouldn’t have the flexibility to earn extra income without Uber.

Finally, Lyons surveys
the money-losing business models of so many Web 2.0 start-ups and naively
wonders “why there are so many companies that remain in business while losing
money”—this after he has started the book with a chapter about getting fired
from his prestigious and well-paying job at Newsweek Magazine, which, like most
dead-tree publications “has been losing money for years.”

Losing money,
whether for a start-up with vast potential, like Amazon.com, or for a fading
franchise like Newsweek, has never stopped anybody from trying. That is, after all, Capitalism.

But the
big-picture stuff feels like an editor made him do it, because the other 98% of
the book moves fast, tells a great story, and actually will make you
laugh.

Out loud.

—JM

NB:
Just for the record, prior to its publication, the author of Disrupted asked,
and I answered, a couple of questions about my perspective on the SAAS business
model of Salesforce.com.